CHAPTER SEVEN

Business and
Organizational
Customers and Their
Buying Behavior

For use only with

Perreault/Cannon/McCarthy
or Perreault/McCarthy texts.
© 2008 McGraw-Hill
Companies, Inc.
McGraw-Hill/Irwin www.mhhe.com/fourps
When we finish this lecture you should

1. Describe who the business and organizational

buyers are.
2. See why business and organizational purchase
decisions often involve multiple influences.
3. Understand the different types of buyer-seller
relationships and their benefits and limitations.
4. Understand the problem-solving behavior of
organizational buyers.
5. Know the basic e-commerce methods used in
organizational buying.
When we finish this lecture you should

6. Know about the number and distribution of

manufacturers and why they are an important
customer group.
7. Know how buying by service firms, retailers,
wholesalers, and governments is similar to—and
different from—buying by manufacturers.
Understanding Business & Organizational
Customers for Marketing Strategy (Exhibit 7-1)
Understanding Business & Organizational
Customers for Marketing Strategy (Exhibit 7-1)

Organizational
Customers

Differences between Key characteristics of specific

organizational customers
& final consumers
•Purchase criteria & specifications
•Multiple buying influence
•Problem-solving process
•Buyer-seller relationships
•B2B e-commerce
types of organizational
customers
•Manufacturers
•Producers of services
•Retailers & wholesalers
•Government units
Business and Organizational Customers – A Big
Opportunity

Manufacturers
Manufacturers
Farms,
Farms,mines,
mines,etc.
etc.
Producers
Producers Financial
Financial
Institutions
Institutions
Other
Otherproviders
providers

Wholesalers
Wholesalers
All Business Middlemen
Middlemen Retailers
Retailers
and
Organizational
Customers Federal
Federal
Governments
Governments State
Stateand
andLocal
Local

National
National
Nonprofits
Nonprofits Local
Local
Serving Small Business Customers
Organizational Customers Are Different
Specifications and Quality

Specifications Quality
Quality
Specifications
Describe Certification
Certification
Describethe
the
Need
Need -- ISO
ISO9000
9000
Many Different People May Influence a Decision
(Exhibit 7-2)
Checking your knowledge

Consuela Velasquez is a receptionist for a group of seven

physicians. As she controls the calendars for the
physicians, any sales representatives from pharmaceutical
companies wanting to call on the physicians have to go
through Consuela. As a result, it is very important for sales
reps to cultivate a good relationship with her. In the buying
center, Consuela would be best described as a:

A. buyer.
B. user.
C. influencer.
D. gatekeeper.
E. decider.
Checking your knowledge

Ahmed Jamison is a purchasing specialist for a large

company. He has the authority to execute purchase orders
for amounts up to $100,000. On a purchase order for a
higher amount, Ahmed arranges the terms of sale, but the
transaction has to be approved by the company president.
In the buying center for a purchase in excess of $100,000,
Ahmed is a _________ and the president is a _________:

A. buyer; influencer.
B. influencer; buyer.
C. buyer; decider.
D. gatekeeper; decider.
E. user; influencer.
Evaluating Organizational Buying Influences

Vendor
Vendor Analysis
Analysis
Considers
Considers All
All Influences
Influences

Behavioral
Behavioral Needs
Needs Are
Are
Important
Important Too
Too

Ethical
Ethical Conflicts
Conflicts
May
May Arise
Arise

Purchasing
Purchasing May
May
Be
Be Centralized
Centralized
Organizational Buyers Are Problem Solvers (Exhibit 7-4)

Type of Process
Characteristics
New-Task Modified Straight
Buying Rebuy Rebuy

Time required Much Medium Little

Multiple influences Much Some Little

Review of suppliers Much Some None

Information needed Much Some Little

Checking your knowledge

Nikita Jackson, a sales representative for an industrial supply house,

calls on a prospective business customer. The customer has an
established relationship with another supplier, but says that there have
been some reliability problems with deliveries. Nikita seizes the
opportunity to describe her company’s state-of-the-art logistics and
transportation system that provides outstanding delivery reliability at
low shipping costs. Nikita is encouraged because her customer seems
to be in a ___________ situation.

A. straight rebuy
B. modified rebuy
C. new-task
D. extensive problem-solving
E. limited problem-solving
Checking your knowledge

Auto parts wholesaler Fixem, Inc. decides to invest in a new data

management system to increase the efficiency of its warehouse
operations. Previously, all record-keeping was done via printed
documents, but now all transactions will be electronic. This change will
require Fixem to expend a significant amount of money for hardware,
software, and training. However, in the long run, the cost savings
should exceed the up-front investment. Fixem has arranged for
presentations to be made by three different vendors. Fixem seems to
be facing a ______________ buying situation.

A. straight rebuy
B. modified rebuy
C. new-task
D. extensive problem-solving
E. limited problem-solving
Buyer-Seller Relationships in Business Markets

Close
Close Relationships
Relationships Relationships
Relationships May
May
May
May Produce
Produce Not
Not Make
Make Sense
Sense
Mutual
Mutual Benefits
Benefits

- Reliable source of - Reduced flexibility

supply - Some purchases
- Cost reductions BUT are too small or
- Price stability or infrequent
concessions
- Reduced - Higher risk from
uncertainty greater purchase
- Joint problem concentration
solving
- Improved quality
Relationships Have Many Dimensions (Exhibit 7-6)
Relationships Have Many Dimensions (Exhibit 7-6)
Checking your knowledge

Gotcha! is a chain of trendy stores catering to the urban contemporary

market. As part of its close relationship with suppliers, Gotcha! has an
Internet site that is accessible only by suppliers, and it provides up-to-
the minute point-of-sale information from all of the Gotcha! stores.
Suppliers can see how their products are doing at retail during any time
of the day or night. In the relationship between Gotcha! and its
suppliers, the Gotcha! supplier site is an example of:

A. information sharing.
B. legal bonds.
C. reciprocity.
D. operational linkages.
E. negotiated contracts.
Dynamics of Buyer-Seller Relationships

Powerful
Powerful Customer
Customer May
May
Control
Control the
the Relationship
Relationship

Buyers
Buyers May
May Still
Still Use
Use
Several
Several Suppliers
Suppliers

Reciprocity
Reciprocity May
May Influence
Influence
Relationship
Relationship
Technology Is Reshaping Many Business Markets
E-Commerce Tools in the B2B Market

Online
Online marketplaces
marketplaces
Buyers
Buyers rely
rely on
on search
search connect
connect buyers
buyers and
and
engines
engines sellers
sellers

Catalog
Catalog sites
sites
Collaboration
Collaboration hubs
hubs
support
E-Commerce automate
automate search
search &&
support cooperation
cooperation delivery
delivery
Tools in
B2B
Market Procurement
Procurement sites
sites
Auction
Auction sites
sites focus
focus on
on operate
operate for
for benefit
benefit of
of
unique
unique items
items buyers
buyers

Reverse
Reverse
Reverseauction
auction
auctionsites
sites
sites
foster
foster
fostercompetition
competition
competition
among
among
amongsellers
sellers
sellers
Emerging Issues in B2B E-Commerce

More
More Progress
Progress
Is
Is Needed
Needed

E-Commerce
E-Commerce Order
Order
Systems
Systems Are
Are Common
Common

ItIt Pays
Pays to
to Have
Have an
an
Ongoing
Ongoing Relationship
Relationship

Variations
Variations in
in Buying
Buying
by
by Customer
Customer Type
Type
Manufacturers Are Important Customers

Clustered
Clustered in
in
Not
Not Many
Many Big
Big Geographic
Geographic
Ones
Ones Areas
Areas

Business
Business Data
Data
NAICS
NAICS Codes
Codes Classifies
Classifies
Industries
Industries
An NAICS Code Example (Exhibit 7-8)

Construction
Construction Manufacturing
Manufacturing Others…
(23)
(23) (31)
(31) Others…

Food
Food Apparel
Apparel Others…
(311)
(311) (315)
(315) Others…

Knitting Apparel
Apparel
Knitting Mills
Mills Cut
Cut && Sew
Sew Accessories
Accessories Others…
Others…
(3151)
(3151) Apparel (3152)
Apparel (3152) (3159)
(3159)

Women’s
Women’s && Girls
Girls Men’s
Men’s and
and Boy’s
Boy’s Other
Other Cut
Cut && Others…
(31523)
(31523) (31522)
(31522) Sew
Sew (31529)
(31529) Others…

Underwear
Underwear && Suits
Nightwear
Nightwear Suits && Coats
Coats Shirts
Shirts Others…
Others…
(315221) (315222)
(315222) (315223)
(315223)
(315221)
Producers of Services – Smaller and More Spread
Out

Car Repair Medical Services Legal Services

Housekeeping Library Small Service

Services Service Buyers
Buying May Not Be Formal
Retailers & Wholesalers Buy for Their Customers

Buyers
Buyers Watch
Buyers Watch
Watch
Computer
Computer
Computer
Output
Output Closely
Output Closely
Closely
Committee
Committee Reorders
Reorders Are
Are
Buying
Buying Is
Is Straight
Straight
Impersonal
Impersonal Rebuys
Rebuys

Resident
Resident Some
Some Are
Are Not
Not
Buyers
Buyers May
May “Open
“Open to
to Buy”
Buy”
Help
Help
The Government Market

Size
Size ++ Competitive
Competitive
Diversity
Diversity Bids
Bids

FCPA
FCPA Rigged
Rigged
Specs?
Specs?

Foreign
Foreign “Approved”
“Approved”
Governments
Governments Supplier
Supplier List
List

Learning
Learning Negotiated
Negotiated
Wants
Wants Contracts
Contracts
You now

1. Describe who the business and organizational

customers are.
2. See why business and organizational purchase
decisions often involve multiple influences.
3. Understand the different types of buyer-seller
relationships and their benefits and limitations.
4. Understand the problem-solving behavior of
organizational buyers.
5. Identify the basic e-commerce methods used in
organizational buying.
You now

6. Know about the number and distribution of

manufacturers and why they are an important
customer group.
7. Know how buying by service firms, retailers,
wholesalers, and governments is similar to—and
different from—buying by manufacturers.
Key Terms

• Business and • Straight rebuy

organizational • Modified rebuy
customers
• Just-in-time delivery
• Purchasing
• Negotiated contract
specifications
buying
• ISO 9000
• Outsource
• Purchasing managers
• Reciprocity
• Multiple buying
• Competitive bids
influence
• NAICS codes
• Buying center
• Open-to-buy
• Vendor analysis
• Resident buyers
• Requisition
• Foreign Corrupt
• New-task buying
Practices Act